Penney is tendering for their 7-1/8’s of ’23 at the whopping rate of $1300 per bond, plus a $50 consent, plus (of course) accrued interest. I couldn’t believe they are paying that much to buy back their debt. Spend $1350 to buy back an obligation of $1,000? That’s crazy. But here’s the wire release. http://finance.yahoo.com/news/jcpenney-commences-tender-offe... Obviously, I tendered, especially since I got in just two months ago at 85.500. Well, let’s see. What will be my achieved gain on that bond investment? Something along the lines of a 204.4% YTY (Yield to Tender, as opposed to Yield to Maturity). And my annualized return is an even more astounding 389.3%!Am I good, or am I good? And that’s why, all you people who scoff at bonds, I play the game. There’s serious money in this gig for them that have learned how to do it. So, read Ben Graham’s, The Intelligent Investor. He tells you how, and the essence of the method is simple: Buy at a sufficient discount to intrinsic value to create a margin of safety. The rest is just details to be picked up on the fly by actually doing bond investing, instead of hanging around in discussion forums, waiting for someone else to lead the way. The money is there for the taking, but it only goes to them that pursue it. And while I've got your attention, let me drive home a further point. Lokiciuous used to accuse me of being reckless, while he presented himself and his methods as being oh-so "conservative". Let's assume he parked his money in PenFed's 10-year, 5% CDs, as opposed to genuine investments. Let's assume further that his combo, Fed-and-State tax- rate is 25% to 30%. Let's assume further that his experienced inflation-rate, not the lie that is the CPI, is a more realistic 5% to 6%. Now, ask yourself this question about the choice he made for himself and the choice he also said was the best one for you to make. How much of your purchasing-power is being lost each year because you are choosing to have PenFed warehouse your currency rather than putting it to work in genuine investments, whether they be stocks, or bonds, or whatever? Now, let's run another though-experiment. Let's admit right up front that fat returns don't come from taking skinny risks. They don't call this stuff "junk" for nothing. The risks of spec-grade bonds are real, and they are huge. But, also, on an apples-to-apples basis, they are far less than those of stocks. So, let's ask this question. How much exposure to the asset-class (or an equivalent one) might be a prudent choice for those who want to see a positive gain on their assets after taxes are paid and inflation is subtracted? Run the numbers, people, and you'd be surprised at how little "extra" risk has to be accepted in order to get your account returns out of the red and over into the black. If you want bigger money, it's there for the pursuing. But if your goal is the same, modest one that I have, of moving my purchasing-power forward to the future against the time when it might the needed, then you've gotta get off your butts and out of CDs, and you've gotta stop believing that the pot of gold promised you by the nonsense that is indexing and Modern Portfolio Theory will be there for you at there of your years of chasing it. The Fed-Treasury-Wall Street cartel intends to break you, and they are doing so, because they have your willing complicity. But it doesn't require much imagination and effort to do an end-run around them. It just requires a bit of thinking and doing, and reading Ben's book is a good place to start. Charlie
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